Chap 11 Probs 28 & 29 G Help Save & Exit Submit Saved Check my work Ritchie Manu
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Chap 11 Probs 28 & 29 G Help Save & Exit Submit Saved Check my work Ritchie Manufacturing Company makes a product that it sells for $170 per unit. The company incurs variable manufacturing costs of $86 per unit. Variable selling expenses are $16 per unit, annual flxed manufacturing costs are $458,000, and fixed selling and administrative costs are $242,400 per year 10 points Required Determine the break-even point in units and dollars using each of the following approaches a. Use the equation method. b. Use the contribution margin per unit approach c. Prepare a contribution margin income statement for the break-even sales volume eBoak References Complete this question by entering your answers in the tabs below Req A to B Req C Determine the break-even point in units and dollars using the equation method, the contribution margin per unit approach and the contribution margin ratio approach a. Break-even point in units Break-even point in dollars Contribution margin per unit Break-even point in units b. Graw Hill Prev 1012 Next >Explanation / Answer
a) Calculation of Break even using Equation method:-
Lets assume Break even units = x
p = Selling price per unit = $170
v = variable cost per unit = $86+$16 = $102
FC = Total Fixed cost = $458,000+$242,400 = $700,400
At Break even point, total sales revenue is equal to total cost, therefore the equation will be as follows:-
px = vx+FC
170x = 102x + 700,400
170x - 102x = 700,400, 68x = 700,400, x = 700,400/68 = 10,300 units
x = Break even units = 10,300 units
Break even in dollars = Break even units*Selling price per unit = 10,300*$170 = $1,751,000
b) Calculation of Break even using Contribution margin per unit approach:-
Break even Point in units = Total fixed Cost/Contribution margin per unit
Contribution margin per unit = Selling Price - Variable cost = $170-$86-$16 = $68
Total fixed cost = $700,400
Break even units = $700,400/$68 = 10,300 units
Break even in dollars = 10,300 units*$170 = $1,751,000
c) Contribution margin income statement for break even sales volume (Amt in $)
Sales (10,300 units*$170) 1,751,000 Less: Variable cost (10,300 units*$102) (1,050,600) Contribution Margin 700,400 Less: Fixed Manufacturing costs (458,000) Less: Fixed selling and administrative costs (242,400) Net Profit (at the break even point profit is zero) 0Related Questions
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